Hello, and welcome to Enact's First Quarter Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Daniel Kohl, Vice President of Investor Relations. You may begin.

Thank you, and good morning. Welcome to our first quarter earnings call. Joining me today are Rohit Gupta, President and Chief Executive Officer; and Dean Mitchell, Chief Financial Officer and Treasurer. Rohit will provide an overview of our business performance and progress against our strategy. Dean will then discuss the details of our quarterly results before turning the call back to Rohit for closing remarks. We will then take your questions. The earnings materials we issued after market closed yesterday, contain our financial results for the quarter, along with a comprehensive set of financial and operational metrics. These are available on the Investor Relations section of our website. Today's call is being recorded and will include the use of forward-looking statements. These statements are based on current assumptions, estimates, expectations and projections as of today's date. Additionally, they are subject to risks and uncertainties, which may cause actual results to be materially different, and we undertake no obligation to update or revise such statements as a result of new information. For a discussion of these risks and uncertainties, please review the cautionary language regarding forward-looking statements in today's press release as well as in our filings with the SEC, which will be available on our website. Please keep in mind the earnings materials and management's prepared remarks today include certain non-GAAP measures. Reconciliations of these measures to the most relevant GAAP metrics can be found in the press release, our earnings presentation and our upcoming SEC filing on our website. With that, I'll turn the call over to Rohit.

Thank you, Daniel. Good morning, everyone. Enact delivered very strong financial and operational results in the first quarter of 2025. This was driven by continued execution against our strategic priorities, robust credit performance and our commitment to creating long-term value for shareholders. In addition, we delivered on our capital allocation priorities highlighted by a new share repurchase authorization and a meaningful dividend increase, which we will discuss in detail later. During the quarter, we reported adjusted operating income of $169 million, up 2% year-over-year. Adjusted earnings per share was $1.10, up 6% year-over-year. Adjusted return on equity was 13.4% and insurance in-force was $268 billion, which was up 2% year-over-year. Housing market conditions in the first quarter were similar to prior recent periods and supported of a strong performance. Housing inventory stayed tight with sustained elevated home prices despite HIBOR borrowing costs. While affordability remains challenged, there is potential for improvement if mortgage rates decline. Additionally, the consumer and labor market continued to be stable with wage growth moderating slightly and a moderate rise in inflation. Looking ahead, we continue to operate in a dynamic and complex environment driven by shifting economic policies and elevated geopolitical uncertainty. However, over the longer term, we believe the drivers of the housing market are intact, given the pent-up demand in first-time homebuyer population as more Americans reached the average first-time homebuyer age. Overall, we believe that mortgage insurance will continue to be a crucial resource to both buyers and lenders alike. Against this backdrop, our capital position and credit performance remained key strengths. Our PMIER Sufficiency ratio stood at a robust 165%, highlighting our strong capital foundation. Our credit and underwriting quality remains strong and is further supported by the significant embedded equity within our portfolio. At the end of the first quarter,…

Thanks, Rohit. Good morning, everyone. We delivered another set of very strong results in the first quarter of 2025. GAAP net income was $166 million or $1.08 per diluted share compared to $1.01 per diluted share in the same period last year, and $1.05 per diluted share in the fourth quarter of 2024. Return on equity was 13.1%. Adjusted operating income was $169 million or $1.10 per diluted share compared to $1.04 per diluted share in the same period last year, and $1.09 per diluted share in the fourth quarter of 2024. Adjusted operating return on equity was 13.4%. Turning to revenue drivers. New insurance written was $10 billion, down 26% sequentially and down 7% year-over-year. Purchase originations were seasonally lower, and mortgage activity remained muted, as elevated mortgage rates and home prices pressured affordability. Persistency was 84% in the first quarter, up 2 points sequentially and down 1 point year-over-year. Our portfolio remains resilient to mortgage rate volatility with 8% of the mortgages in our portfolio, having rates at least 50 basis points above March's average mortgage rate of 6.7%. Looking ahead, we anticipate the elevated persistency will continue to help offset any impact of higher mortgage rates that could reduce the size of the origination market. Given the combination of lower new insurance written and elevated persistency primary insurance in-force was $268 billion in the first quarter, relatively flat from $269 billion in the fourth quarter of 2024, and up $4 billion or 2% year-over-year. Total net premiums earned were $245 million, down $1 million sequentially and up $4 million or 2% year-over-year. The decrease sequentially was driven by higher ceded premiums, while the year-over-year increase was primarily driven by premium growth from attractive adjacencies and the growth of our mortgage insurance portfolio, partially offset by higher ceded…

Thanks, Dean. Looking ahead, we believe our strong balance sheet, prudent risk management and focus on long-term fundamentals position us to navigate this dynamic macro environment. Our strategy remains grounded in our mission of helping people responsibly achieve the dream of homeownership, and we remain committed to creating long-term sustainable value for all our stakeholders. Operator, we are now ready for Q&A.

Thank you. [Operator Instructions] Our first question comes from Mihir Bhatia with Bank of America. Your line is open.

Hi. Good morning. Thank you for taking my question. I wanted to just start with something you mentioned, Rohit, about just being prepared for uncertainty and specifically around maybe underwriting and pricing. I know you reiterated the outlook for base premium rates to be relatively stable. But that's obviously at a portfolio level. I was curious what you're seeing in the market or if you've done taken actions in April, right? Just given all the macro noise, the uncertainty increasing in April. Is there – how is the industry or Enact, however you're comfortable answering that reacted to that? Or have you all so far because the data hasn't changed, you've maintained the pricing and underwriting standards or not really tighten and change? I'm just curious, how you're reacting to that uncertainty increasing from an underwriting perspective.

Yes. Good morning, Mihir. Thank you for your question. So I would say, given the evolving dialogue that we are seeing on tariffs, it's difficult to predict the exact magnitude and breadth of economic impact. But what I can tell you is we are doing a diligent monitoring of the economic impact, whether it's across the country or specific economic sectors or specific geography. So that continues to be an ongoing process right now. I would also tell you that we are maintaining prudent guidelines and underwriting and our leveraging our strong capital base, as I said in my prepared remarks, to help well-qualified borrowers get into homes. Now when it comes to April and most recent kind of actions and what we have observed in the market, I would say, we continue to find pricing constructive in the marketplace, and we have used our Rate360 capabilities, especially with the most recent iteration to adjust our pricing to reflect the current level of uncertainty. It's too early to say what the rest of the market is doing just because we are just wrapping up the month of April and don't have the indications from the market, but I would say our own posture has been to strengthen our pricing in reaction to that market uncertainty that all of us are observing.

All right. Thank you. And then just one other question, again on government policy, and I know it's evolving. Has there been any on-the-ground impact from – of that – of the changes we've heard about so far? And any changes, in particular, I'm curious about like on the loss mitigation side because I know there's been obviously post-COVID loss – COVID loss mitigations were basically made – were extended and what continues, and they have been a pretty big beneficiary of cures. Have you seen any impact from any of those changes? Thank you.

Yes. Thanks, Mihir. So we've had constructive engagement with the new FHFA Director and in a market where we have lower affordability, we continue to work very constructively with FHFA and GSEs to make sure that we are serving our role well and putting first-time homebuyers in homes and putting our capital in front of taxpayers. As far as loss mitigation changes that we have observed, most of those have been on the FHA and VA side, we actually have seen continued strength in GSE loss mitigation, whether we call it waterfalls or consumer loss mitigation options. Those continue to stand strong. And I agree with your point that post-COVID, the best practices from COVID and the best experiences were COVID were carried forward into new loss mitigation program. So we are actually very optimistic about those loss mitigation programs actually giving us more options for consumers in the event the consumer actually goes delinquent on a loan and helping them get them back on their feet.

Okay. Thank you for taking my questions. I'll get back in queue.

Thanks, Mihir.

Thank you. Our next question comes from Doug Harter with UBS. Your line is open.

Thanks. I guess along the lines of pricing. In the last couple of quarters, we've – we have seen some shifts in market share from other players. Just hoping you could talk more about the pricing dynamics and kind of what you see that leads to market share changes and – or just how sensitive the market is to price?

Yes. Good morning, Doug and thank you for your question. It's tough for us to comment on other companies' market share and trajectories or volatility. What I would say is our market participation has been relatively stable, I would say, over the last four to five quarters. I would also say that when we think about market share, it's not exactly a target for us, it's much more dependent on our alignment on risk and return in the market and what we see in terms of the quality of the business and what we are getting paid. So we have been very happy with our market participation. We've been very happy with about $10 billion of NIW, we wrote in the first quarter. Obviously, market share is not known yet for first quarter completely because not all companies have reported. But I would say some of the thing's changes can be caused by pricing, but they can also be caused by just the lenders you specifically do business with. So if you do business with a specific lender who has a big quarter in terms of origination activity, or they have a big focus on purchase versus refinance and the market composition changes between those segments that can create movements in market share. So those would be just – in addition to pricing and guidelines, those could be additional levers. Those could be additional movements that cause changes in market share for any company in our industry. I hope that helps.

It does. Thank you.

Thank you.

Thank you. Our next question comes from Rick Shane with JPMorgan. Your line is open.

Good morning guys. Thanks for taking my question. So as we sit today at the end of the first quarter of 2025, if we total up the insurance in-force from 2023, 2024 in the first quarter, it represents about 38% of your book. If we did the same exercise at the end of the first quarter of 2022, it would have been 74% of your book. So the book was almost twice as concentrated three years ago in recent cohorts as it is today. Obviously, that's a function of what's happened with rates, with purchase activity. We all understand the dynamics. I'm curious as you guys look at a portfolio that was three years ago, very unusual in historical context, a portfolio today that's very unusual in historical context, what you think are sort of the best-case scenarios of how this evolves and what are the biggest risks? Because this industry is facing a different profile, I wouldn't even say challenges, it's just characterized differently today than it has been before.

Yes, Rick, it's Dean. Thanks for the question. A couple of different ways, I think your question can go. The first would be something that we started talking about a couple of quarters ago, and it's really the seasoning of the portfolio and the impact that seasoning has on new delinquency development. So as you mentioned, you go back a couple of years, our portfolio was much younger, much less mature and it was moving up the normal delinquency curve pattern. And I think we saw that – some of that impact last year when you think about year-over-year increases in new delinquencies coming in, in the kind of mid-teens range over the course of 2024. What we've talked about now in 2025 as that book year continues to season, I think the average age of our book is now 3.9-year season. That's up a tick from last quarter, and it's up meaningfully from several years ago. It continues to progress towards closer to the peak of that normal delinquency development curve. That happens around years three and four and thereafter, it plateaus kind of out 12 to 18 months thereafter. I think what that means is we should see the increase in new delinquency development slow compared to last year's increase. And in fact, when you look at this Q1 performance. I think it reflect – reflects that slowing. So it was roughly 7% year-over-year increase relative to last year at the same time. We saw something it came to a 19% increase. That's obviously the impact on the aging of the portfolio that I think your question gets at, but any discussion on credit performance needs to have the caveat that delinquency development is certainly going to be subject to the macroeconomic environment that books are aging through.…

Yes, Rick, just to add to Dean's point, I agree with everything Dean said, just lifting up, I would also say we would love to have a bigger market. I think if mortgage rates were lower and affordability was better, we would have a bigger market size. We have talked about the origination units being significantly down over the last few years, just given lack of affordability. But I would say maybe the silver lining here is, if you think about the age of our book, there are more consumers in our book who are more experienced in managing their debt. You combine that with the embedded equity aspect that Dean talked about, we have a more resilient book right now than we would have had in 2022. We have a comparison of 38% versus 74% from the last few book years. And if there is uncertainty in the market or any negative news in the market, we are going into this environment with a more resilient book from a consumer performance perspective and equity – embedded equity perspective. So we see that as also a resilience point and a silver lining in terms of age of our book at this point.

Got it. I definitely agree with that. If I can ask one follow-up. When – so the older cohorts have benefited immensely from HPA. They were not underwritten with any expectation that, that was going to happen. That would have been imprudent and that was a windfall for the industry. You had alluded to your underlying assumptions. Do you – as you're writing policies today have a more conservative assumption on HPA going forward than you were applying three years ago because of the sharp run-up in home prices? Or is that – do you assume a kind of consistent HPA, but now just off a higher base.

Yes. Thanks, Rick. I think that ties into Rohit's response to a prior question, which is we absolutely take into account the prospective view, our prospective view of the macroeconomic environment. That certainly includes home prices and – yes, today, we would have given the slower rate of home price appreciation, we would embed that into our pricing, and that would certainly impact price up from our perspective, all things held equal in current pricing vis-a-vis prior environment.

Yes. And I think you saw the example of that back during COVID, every single MI company in the industry talked about their price increases in the second quarter of 2020, and all of that happened in a very short timeframe. The moment all of us basically saw unemployment rates going up or the possibility of unemployment rates going up, everybody adjusted their conditional scenarios with their internal views and then raise prices. So Rick, that's very aligned with how we run the business because our books age, based on that prospective view and the loans are going to be with us for four, five years, maybe even longer, and we want to make sure that we are pricing appropriately for that risk.

Got it. Okay. Terrific. Thanks guys. Thank you very much.

Thank you.

Thanks, Rick.

Thank you. [Operator Instructions] Our next question comes from Bose George with KBW. Your line is open.

Hey, everyone. Good morning. Actually, have you all seen any signs of cancellation rates increasing? Just obviously, these books – the persistency rates remains high and with the higher for longer that could continue. So just any thoughts there?

Yes. We've monitored that pose through time over the last several years. We really haven't seen any change in behavior or the change in the level of activity as it relates to borrow initiated cancellation. The vast majority of our lapse or cancellations really occur from refinancing activity, loans that are paid in full and hope auto cancellations or loans to amortize down to 78 LTV. That continues to hold true through the first quarter. And again, just borrow initiate cancellation hasn't been that big of a driver for us over time and through today.

Okay. Thanks. And then actually, the other income line, so I guess, is that mainly the reinsurance income. And also, is that just premiums? Or is there kind of a mark-to-market component that goes through there as well?

Yes. The other income line includes our contract services, the fees associated with our contract services underwriting. So it's – it has several components, not just premiums those.

Okay. But the run rate this quarter is kind of a reasonable number?

Yes. I mean that number varies, as you can see in our QFS disclosure. It's still pretty small at $2 million, but you've seen it range from one to – I guess, two to three.

Okay, great. Thanks.

The one thing I would say, we have some – we do have some arrangements in Q1 related to our reinsurance contract that probably aren't in a normal run rate. So it might be inflated by $1 million. So I'd probably point you to closer to $1 million as a normal run rate vis-a-vis $2 million. But you can see through time that it changes in that general range.

Okay, great. Thanks.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Rohit Gupta for any closing remarks.

Thank you, Michelle, and thank you, everyone. We appreciate your interest in Enact, and I look forward to seeing many of you in New York at BTIG's Housing Ecosystem Conference on May 8. Thank you.

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.